Indonesia, Freeport fail to reach deal over copper export permit

http://www.reuters.com/article/indonesia-freeport-idUSL3N15C5P6

Thu Jan 28, 2016 1:24pm EST

Indonesia, Freeport fail to reach deal over copper export permit

JAKARTA | BY WILDA ASMARINI AND BERNADETTE CHRISTINA MUNTHE

Indonesia's government and Freeport McMoRan Inc on Thursday failed to reach a deal on extending the U.S. mining giant's six-month export permit, potentially halting shipments from the country's massive Grasberg copper and gold mine.

An export stoppage would deal a blow to Freeport's profits and deny the Indonesian government desperately needed revenue from one of its biggest taxpayers. It could also buoy global copper prices, which have slipped 3 percent so far this year on worries about oversupply.

Freeport's six-month export permit for its Indonesian unit expired on Thursday and it was unclear how soon a new one would be issued as the two sides have yet to resolve a government demand that the U.S. firm first pay a $530 million deposit.

"It's done for today. For the next meeting with Freeport, there is no schedule so far," Bambang Gatot Ariyono, the mines ministry's director general of coal and minerals, told reporters.

"It's no problem if Freeport doesn't export tomorrow." 

Energy Minister Sudirman Said earlier this week had said he was certain the government would approve the export permit and was open to negotiations with Freeport on the $530 million deposit.

Freeport said in a statement it was still engaged in discussions with the Indonesian government and was confident Jakarta would issue the license.

Indonesia wants the deposit as a guarantee that the Phoenix, Arizona-based company will complete construction of another local smelter. The amount would add to an estimated $80 million that Freeport set aside in July 2015 to obtain its current export permit.

Said said Freeport must offer an alternative if does not want to provide the deposit to demonstrate its commitment to expanding Indonesia's smelter capacity.

Freeport CEO Richard Adkerson said late on Tuesday the government's demand for a smelter deposit was "inconsistent" with an agreement reached between the two sides in mid-2014.

According to that agreement, Freeport must sell the government a greater share of the Grasberg copper and gold mine, located in the province of Papua, and invest in domestic processing to win an extension of its mining contract beyond 2021.

Usually, Freeport Indonesia produces about 220,000 tonnes of copper ore per day. About one-third usually goes to its domestic smelter at Gresik.

A prolonged interruption to the mine would affect about 24,000 workers at Grasberg, potentially leading to unrest in a region where Indonesia's government is trying to increase economic activity. 

(Reporting by Wilda Asmarini; With additional reporting by Susan Taylor in Toronto; Editing by Himani Sarkar, David Evans and Paul Simao)